Truck manufacturers are reeling after EC’s hit-and-run with record cartel fines

On 19 July 2016, the European Commission announced that it had imposed record cartel fines totalling almost €2.93 billion (approximately A$4.3 billion) as part of settling proceedings against five truck manufacturers for their participation in a cartel spanning 14 years.

The behaviour and participants

Following raids in January 2011, the EC’s investigation found that, between 1997 and 2011, MAN, Volvo/Renault, Daimler, Iveco and DAF had engaged in a cartel relating to:

coordinating “gross list” price levels (factory price set by each manufacturer) for medium and heavy trucks in the European Economic Area;

the timing for the introduction of emission technologies for medium and heavy trucks to comply with the increasingly strict European emissions standards; and

passing through to customers the costs for the emissions technologies required to comply with European emissions standards.

According to the Commission’s media release, the cartel started rather informally in a hotel in Brussels in 1997 which transcended into regular meetings between senior managers (often as sidebar conversations at trade fairs and events) before becoming more formal from 2004 onwards.

Before announcing fines on 19 July 2016, the Commission’s investigation resulted in the EC sending Statements of Objections to the parties in November 2014 which outlined the allegations against them.

The fines

In determining the fines imposed on each company for their involvement in the cartel, the EC considered a number of factors, including:

each parties’ sales of medium and heavy trucks by each company in the EEA;

the high combined shares of the parties (according to European Commissioner for Competition, Margrethe Vestager, these companies “together account for around 9 out of every 10 medium and heavy trucks produced in Europe”); and

the geographic scope and duration of the cartel.

As the immunity applicant, MAN received full immunity from fines (which would otherwise have been approximately €1.2 billion) under the European Commission’s Leniency Notice. As parties that cooperated with the EC’s investigation, each of Volvo/Renault, Daimler and Iveco also received reductions in their fines.

In exchange for agreeing to settle the allegations against them, all five parties also received a 10% discount under the European Commission’s Settlement Notice (see further in the table below).

The total fines imposed by the EC are as follows:

Company

Leniency reduction

Settlement reduction

Fine (EUR)

MAN

100%

10%

0

Volvo/Renault

40%

10%

~670 million

Daimler

30%

10%

~1.01 billion

Iveco

10%

10%

~495 million

DAF

–

10%

~753 million

Total

–

–

~2.93 billion

This surpasses the previous highest fine for a cartel investigation, when the EC imposed fines totalling €1.4 billion on seven TV and computer monitor tubes cartelists in December 2012.

However, the pain financial for these truck manufacturers is unlikely to end with the Commission’s fines as they brace for monster follow-on damages claims from affected parties. Securing damages in European national courts is also likely to become easier for aggrieved parties with the requirement that EU Members implement the Antitrust Damages Directive into their legal systems by late December 2016, and it is expected that class actions could be commenced in a number of jurisdictions.

Antitrust enforcement in the era of Vestager

Since European Competition Commissioner, Margrethe Vestager, took the reins of DG Comp in November 2014 under the Juncker Commission, Vestager has taken aim at some of the world’s biggest players, including Google, Gazprom, Mastercard and Sky. However, we are yet to really see how the Commissioner will approach antitrust enforcement where parties accused of competition law infringements (including cartels) refuse to negotiate and settle Commission proceedings initiated under her watch.

EC settlements tend to be a much quicker, less costly and simplified way to bring infringements to a conclusion (for the Commission and businesses alike) and have increasingly been used to settle European antitrust violations. However, one of the drawbacks of settlement decisions is that they lack the same precedent value as binding infringement decisions.

Unlike her predecessor, Joaquin Almunia, who tended to prefer settling antitrust claims and extracting commitments from parties, Vestager has indicated that she will not shy away from court action if it is required. And we may yet see Vestager’s mettle tested in this truck cartel investigation as a sixth participant, Scania (owned by Volkswagen), has refused to settle and this aspect of the Commission’s investigation rolls on.